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The price of wine

7 October 2015

The article at a glance

Study on fine wine values co-authored by Elroy Dimson of Cambridge Judge is featured in Decanter magazine as part of its 40th …

Study on fine wine values co-authored by Elroy Dimson of Cambridge Judge is featured in Decanter magazine as part of its 40th Anniversary Index.

The price of wine
A study on the historic investment value of fine wines co-authored by Elroy Dimson of Cambridge Judge Business School is featured in the 40th Anniversary Index of Decanter magazine – which found that the average price of a five-year-old bottle of first-growth Bordeaux cost just £6 in 1975 compared to about £500 today.

Professor Elroy Dimson

“Many a nostalgic tear will be shed at the thought that you could pick up a bottle of 1970 first-growth Bordeaux 40 years ago for about the current price of an entry-level Chilean Cabernet,” the magazine says in its November issue, out today.

The Decanter 40-year Index – based partly on the research co-authored by Dimson – found that first-growth Médoc prices have risen 85 times in nominal terms, or a compound annual growth return of 11.75 per cent.

The Index found that the average price of 1970 first-growth Bordeaux in 1975 was £6.02 per bottle – which contrasts with an average price of the 2005 vintage in 2010 of £602.58 per bottle, and, following a market softening, a value today of the 2010 vintage of $499.07 per bottle.

The academic study co-authored by Dimson – entitled “The price of wine” – uses a dataset of 36,000 prices from Christie’s and Berry Bros from 1899 to 2012 to show that fine wine provided a real, annualised financial return of 4.1 per cent – compared to 2.4 per cent for art, 2.8 per cent for stamps and 5.2 per cent for equities.

The study by Dimson, Chairman of the Newton Centre for Endowment Asset Management at Cambridge Judge, Peter Rousseau of Vanderbilt University and Christophe Spaenjers of HEC Paris was published in August in the Journal of Financial Economics.

Decanter‘s 40-year Index used the study’s historical price series and combined it with data from the Liv-ex Fine Wine 50 Index from the London International Vintners Exchange (from 2000 to now) – and found that fine wine has offered a “far more lucrative long-term return than gold” and lagged only slightly behind the stock market over the 40-year period 1975-2015. The study focused on the Medoc’s five first-growth châteaux – Haut-Brion, Lafite, Latour, Margaux and Mouton.

“But it’s not all about money,” says the magazine, noting that “The Price of Wine” study “highlights a ‘psychic dividend’ of owning bottles that slowly assume historic significance.”